Understanding the Cost of Independent Living

Exploring independent living communities

If you're considering an independent living community, it's likely you've got more than a question or two. What is independent living going to cost? What happens if I need assisted living sooner than I think I will? What are my options for senior living in general? Or perhaps you just want to be around other active seniors, who share your background and interests, and you want to know if you can afford to make the move.

Before you can start assessing the costs of an independent living community, however, you need to narrow down the many options involved in senior housing first. Let's take a deeper look at all things involved in a senior living community.

What are independent living costs and what are my options?

More than any other type of senior care, those looking for independent living have a wide array of options available. The type of personal care assistance or community you choose will have a significant effect on the costs involved.

Take a look at the most common types of independent and assisted living costs and the costs involved in each below.

Types of senior living communities for independent older adults

Active adult communities and age-restricted communities

These communities, which typically target baby boomers, combine single-family homes, condos, and apartments. They often feature significant recreational amenities and opportunities for social involvement.

On the surface, these communities look like other master-planned communities. That is until you realize they're made up of older adults aged at least 55. The finances involved are also like moving into a master-planned community.

Usually, most of the residents purchase their houses or condos in a typical real estate transaction. The only difference is the age restriction. Renters may rent from the community or from individual homeowners. In many cases, there are restrictions on the length of overnight stay for visitors whose age is under the minimum for the community.

As with any real estate development that has a homeowner's association, you can expect to pay a monthly membership fee or dues to cover the community costs. This fee might run as low as $300 per month, depending on the community's location and amenities.

What does that fee cover? Certainly it will cover all exterior maintenance, including lawn care. It's likely to cover most of the recreational facilities and amenities. More expensive amenities, such as golf courses or tennis courts, may also incur separate charges — this is to avoid charging all residents for pricey amenities that they don't use. In many senior living residences, you can purchase packages with services according to your needs, such as housekeeping services, or a meal plan.

Senior apartments

There are two basic types of senior apartments: age-restricted apartments and apartments reserved for low-income seniors.

Age-restricted apartments are allowed under the Fair Housing Act to restrict rental by age, so only those 55 and up (or in some locations, 62 and up) have access to the apartment complexes. These might consist of a single building on a city block or a retirement community with substantial amenities.

These are essentially active adult communities in which everyone is a renter rather than a homeowner. You can expect to pay the going rate for apartments in your neighborhood, meaning the cost varies based on location.

Apartments for low-income seniors can include:

• Section 8 low-income housing, with seniors using Section 8 vouchers to pay part or all of the rent
• Public housing in buildings designated for low-income seniors
• Private apartments that reduce their rates for seniors, often through funding from the Department of Housing and Urban Development

Rents in these low-income apartments still vary according to region, but they're strictly limited based on the fair market rents in the area. You may be eligible for public housing if your income is 30 to 80 percent of the median family income for your area. Local public housing agencies can explain more about eligibility and fair market rents for your area.  At times, wait lists are closed or very long. It’s important to check regularly on when they will be open and get on these lists as soon as you realize you may need it.

Continuing care retirement communities (CCRCs) or life plan communities

These communities provide a continuum of senior living care from independent living and memory care to assisted living to skilled nursing facilities. So if you're looking for an independent living community and want to be able to transition to an assisted living community without having to move, this type of senior living is ideal. Adults can stay in their larger community even as their physical needs change.

Because Continuing Care Retirement Communities, or Life Plan communities, are so comprehensive, it's no surprise that they're also the most expensive independent living option. Expect to pay a significant entrance fee to join a CCRC — anywhere from $50,000 to close to $1 million.

That hefty fee doesn't necessarily limit CCRCs to the very wealthy, however, since most people fund it with the proceeds of the sale of their family home.

Monthly charges vary greatly at a CCRC, depending on the answers to several factors:

• What type of housing are you looking for? Some options include a studio apartment, 1-bedroom, 2-bedroom, and so on.
• How many people are moving into the facility? If spouses are moving in together, fees will be higher.
• What medical needs do you have? How healthy are you? Because CCRCs include medical care, this becomes a factor, unlike other independent living options.
• Do you plan to rent or buy? Some CCRCs allow you to purchase your residence, which may make a difference in your tax situation.

Those monthly charges typically rise at a rate of about 4 to 6 percent a year. That can add up over time, so you should crunch the numbers to see if your anticipated income from Social Security, investments, pensions, and annuities will still cover it for 10 or 20 years in the future. In addition, check to see if the CCRC has any caps on the amount monthly fees can increase each year.

The other key factor in the cost of a CCRC is the type of contract you sign up for. Three different kinds of contracts exist for CCRCs. The specific facility you're looking at may offer all three or just one.

Take a look at our article on CCRC costs to learn more about the different types of contracts.

Senior co-housing

These communities feature two to four dozen homes centered around a common outdoor area. They also share indoor living space usually in the form of a common house that includes a shared kitchen, dining room, guest rooms, and other facilities in many independent living communities such as media rooms or art rooms.

Members of a co-housing community buy their home in the same community, and their share of the common property in a standard real estate transaction that is similar to buying into a condo community.

Buyers can expect to save anywhere from $70,000 to about $350,000 compared to a private real estate purchase.

Cruise ship retirement

This exotic option can be pricey, yet some active adults build up loyalty points on a cruise line and use them to defray the cost of traveling and living on a cruise ship. Plan on at least $100 a day (or $3,100 a month).

Ultimately, this covers small accommodations, meals, housekeeping, laundry house cleaning, entertainment, and activities that can indeed be lavish.

Basic medical care is also available 24/7, and it's reimbursable by Medicare if the ship is within 600 miles of a U.S. port — though seniors with significant medical needs may not be able to get the care they need.

You’ll need to plan ahead so that you are booked on back-to-back cruises, or a place to stay between trips. You’ll need to keep up with your passport and vaccinations, as cruise ships have a high rate of infections diseases and potetial for outbreaks like COVID-19.

The village movement

This independent living alternative lets active adults age in place in their own homes while joining a membership-based "village" that provides discounted services including home health care, home maintenance, and meal delivery.

Members typically pay about $300 to $600 per year to belong to the village.

Membership fees for independent living communities

As with many communities and any real estate development that has a homeowner's association, you can expect monthly costs to shift. This said, be sure to anticipate a monthly membership fee or dues to cover the costs of certain types of programming at independent living communities.

This monthly fee might run as low as $300 on a month-to-month basis depending on the community's geographic location, amenities medical assistance, dining services and amenities, and more.

What does the fee cover?

Typically, it will cover all exterior maintenance, including landscaping. It's likely to cover most of the recreational facilities and amenities. More expensive offerings, such as golf courses or tennis courts, may also incur separate charges. This is to avoid charging all residents for costly amenities on their monthly bills that they don't use.

How location affects membership fees

The combination of mortgage (or rent) and membership fees can vary dramatically depending on location, with average rent ranging from as low as about $1,500 a month to over $6,000 a month. In terms of a median monthly cost, expect to pay higher prices if you're looking for a community in Connecticut, Maryland, Massachusetts, New Hampshire, or New York, where senior living costs tend to be higher overall.

If you're counting pennies, head to Illinois, Louisiana, Minnesota, South Dakota, or Utah, where you can find active adult communities in the $1,500-$1,800 range.

How to pay for independent living communities: resources to help

Generally, you should expect to pay for the costs of independent living out of your own pocket, just as if you were in a residence that's not in an independent living community.  However, there are some services that you may be eligible for that help you with support services provided in the home. If you should need in-home or medical services or care, a long-term care insurance policy could help pay those costs.

Veterans care services

Veterans can receive some assistance from the U.S. Department of Veterans Affairs with vouchers for housing or home health services. If you or your loved one are eligible for low-income housing, you may be able to receive some governmental help.

Life insurance policies

Many seniors are able to transform their life insurance policies into cash through a life settlement agreement. While this financing method provides money when you need it, all the proceeds of the life insurance will go to the company, rather than to your original beneficiaries.

Inheriting property

Sometimes family members contribute toward the purchase of a home in an independent living community by supplying the down payment for the purchase, and/or paying the mortgage, while the senior living in the community pays for the monthly fees and other expenses.

The family members can then inherit the property easily, since their name is on the deed, and are able to treat it as an investment.

Independent living made simple

Understanding the cost of independent living is a crucial first step in the discovery and decision process. By taking the time to explore the costs and expenses associated with independent, you're sure to make an informed decision.

All in all, independent living costs go beyond just rent and utilities. It's essential to consider factors like transportation, healthcare, groceries, and personal care services when calculating the overall expenses.

Of course, there are both benefits and drawbacks to the different kinds of independent living arrangements. Each option comes with its own set of costs and amenities, so it's essential to find an appropriate balance. Creating a budget and exploring financial assistance can help alleviate the financial burden of an independent living cost.

By approaching the topic with open communication, research, and a realistic understanding of the expenses involved in senior independent living, you can make smart decisions that support your loved one's desire for independent living. With the right approach, you can help them find a safe, nurturing environment that allows them to thrive.